13.5% VAT rate in hospitality sector ‘will close restaurants’

The hospitality sector has called for a review of the increase in the VAT rate which comes into effect on New Year’s day.

The tax was lowered to 9% almost 8 years ago to help create jobs during the recession, and having achieved this, the Government opted to restore the rate to 13.5% during Budget 2019.

The lowest hourly wage that businesses are allowed to pay their workers is also going up by 25 cent to €9.80, from tomorrow.

Business people fear the moves will lead to some businesses closing or cutting jobs.

CEO of the Restaurants Association of Ireland Adrian Cummins said he expects a lot of closures in regional and rural Ireland.

“I think the Government didn’t take into consideration that Brexit is within 88 days now. It will have an effect on tourism, it will have an effect on border counties.

“The minister moved the VAT rate from 9%, which was the average VAT rate in Europe, to 13.5% which is the third highest in Europe. That doesn’t make us competitive.

“We need to review this immediately, in light of Brexit.”

Ruth Mulhern is owner-operator of Stef Hans, a café based in Thurles, Tipperary.

She and her husband, chef Stefan Matthia, ran the business for three and a half years, before taking the decision to close based on the rising costs

Speaking on RTÉ’s Morning Ireland, Ms Mulhern said, “I know there had been a huge amount of lobbying within the industry and there was a hope that maybe it would be 11%, and then we discovered it was going to be 13.5%.

“We realised that it was going to be pretty much unmanageable for reasonably new business such as ourselves.”

The café employs between seven and ten part-time and full-time staff.

“Initially when we looked at the figures, and we looked at that jump of 50% (VAT),” she said, “it just doesn’t make sense. Anyone who tries to do something for themselves seems to be punished, and that’s how we see this hike.”